At Face Value: The Secret Life of Debt

Our relationships with debt and credit, and the various behaviours that stem from this, are incredibly fascinating things. One of the most interesting aspects to debt is its cultural particularity. The reasons why people get into debt, and how they perceive and (mis)manage it, are incredibly culturally specific. The primary drivers for debt in South Africa, for instance, are education and social mobility (of which education is a fundamental component to many). The primary drivers of debt in Singapore, in contrast, are public perception and bringing pride to myself and my family, with visible spending serving as a social signal that I am earning and doing ‘well’.

In May this year we were afforded the honour of being recognised with a BX Practitioner’s Award. Our award-winning intervention sought to nudge overleveraged Singaporean borrower’s to repay their debts and better manage their money. The BX Practitioner’s Awards are one of the foremost awards in our industry which recognise innovative, effective, durable and low-cost behavioural solutions to some of businesses’ and societies’ biggest problems. Judged by esteemed academics and leaders in the field, our receipt of this award is a tremendous honour and an exciting moment for Gravity as we enter our third year.

The challenge that we set out to solve was to nudge Singaporeans to better manage their debts.

The limits surrounding the amount of personal debt that Singaporeans can have has been significantly reduced over the last year, with further curtailments planned. Getting the growing number of people who risk having their credit suspended to engage with this information is thus becoming increasingly important. This is not only for the wellbeing of the individuals concerned, but also for the financial institutions and Singaporean government as a whole.

Upon exceeding their personal credit ratio, Singaporeans are sent a letter from their financial institution (FI). As is detailed in the letter, they either need to update their income records to prove that they are earning more, to pay down their debts, or to receive debt consolidation and counselling to help them regain control of their financial lives. If they don’t take one of these remedial steps within three consecutive months of receiving warning letters, they will have their access to credit, across all FI’s, suspended.

The core problem was that, like all too many of us, Singaporeans are largely overcome by the Ostrich Effect. They tend to ignore and/or failed to open their letters, or failed to understand and engage with this information in a meaningful way. This meant that they often ended up missing helpful advice and opportunities to remedy their financial situation.

Our intervention was incredibly simple, cost-effective and scalable, but holds tremendous opportunity for shifting long-term debt management behaviour in Singapore as a whole. It all came down to a little blue envelope.

As is all too often the case with debt, until it is too late, the extent of our overspending is hidden from public view. However, most us of would be very ashamed if others knew our financial status. This ‘private’ nature of debt takes on especial significance in Singaporean culture where the main reason for getting into debt is the ‘public’, social status that (over)spending affords you.

One of the primary motivations for the so-called credit and ‘Kiasu’ culture in Singapore concerns ‘gaining’ or ‘saving’ face. Your ‘face’ is essentially your social esteem and standing. Like the western conception of identity - but much more group and community-centric - your ‘face’ is incredibly important to your conception of yourself; relationships with others; your work prospects; and even your ability to live a full, successful and meaningful life. The ‘loss’ of face can spell the end of your career, of your closest and most important relationships, and your sense of self in its entirety.

We sought to overcome borrowers’ desensitization to suspension warning letters by repackaging these in branded navy blue envelopes, the colour of the Monetary Authority of Singapore (MAS) which is responsible for overseeing all personal debt and credit.

While giving and receiving red envelopes is commonplace in Singaporean culture - and has positive social and financial connotations, typically bearing monetary gifts or wedding invitations - blue envelopes would be distinct. They would thereby counteract Singaporean’s desensitization, attract attention and increase the likelihood of opens and engagement. More importantly, the receipt of a navy blue envelope would soon become instantly identifiable as a warning, by recipients and others.

By a simple, low-cost adjustment to the presentation of this information we were able to add a subtle but strong social signal and public-private element to these letters, while still retaining the MAS’ and FI’s duty to confidentiality.

The intervention was all the more powerful when considered in light of SingPost’s stringent letterbox placement requirements. Whether for private homes, or in residential or business complexes, all letterboxes are required to be in ‘communal’, well-lit areas which are easily accessible (and thus visible) from the street. The perception that your receipt of this blue envelope was, or could have been, seen thus becomes all the more motivating.

This is in part due to the power of panopticism, first conceived by Michel Foucault. The theory essentially holds that when we perceive we can be constantly monitored, we self-regulate behaviour becoming obedient. We do so not because we’re told to, or punished if we don’t, but rather because the perception that others could be watching leads us to self-regulate and adjust our behaviour.

We coupled our redesign of the blue envelope with a small, but important, message inscribed on the reverse. It said “Contact [FI] or Credit Counselling Singapore today”. Cognisant of the power of the Ostrich Effect and our inclination to dissociate and disengage with such stressful, negative information, we took steps to circumvent borrowers’ need to open the letter at all. Upon seeing the envelope – whether consciously, actively engaging or not – they are aware that they risk suspension, and who they should contact to resolve this.

Aside from the power of our intervention in increasing opens, engagement and self-remedies, the long-term, wider implications for Singaporean debt management and credit culture in its entirety are tremendous.

Not only are recipients that much more likely to better manage their debts over the long-term to prevent receiving one of these letters again, but furthermore by making debt (mismanagement) somewhat publically visible we create an opportunity to shift Singaporean credit culture in its entirety. When debt becomes somewhat more visible, visible (mis)spending is disincentivised.